Consumer Guide

There have been many incidents of credit card users being harassed by the so called Recovery Agents appointed by the card issuing firms. We have often heard about the methods deployed by these Agents. Making threatening calls over phone, calling at odd hours, kidnapping and even sending eunuchs or hijras are some of the methods. We have received complaints where the bank/recovery agents are demanding money even when the customer has not received any outstanding statements from the banks. How customers are protected against this and what does RBI say on this?

Following are some of the salient points from RBI’s Order No. DBOD.FSD.BC.49/ 24.01.011/ 2005-06 dt.21-11-2005 with regard to the Credit Card Operations of the Bank:

Wrongful billing

a. The card issuing bank / NBFC should ensure that wrong bills are not raised and issued to customers. In case, a customer protests any bill, the bank / NBFC should provide explanation and, if necessary, documentary evidence to the customer within a maximum period of sixty days with a spirit to amicably redress the grievances.

b. To obviate frequent complaints of delayed billing, the credit card issuing bank / NBFC may consider providing bills and statements of accounts online, with suitable security built therefor.

Protection of Customer Rights

Customer’s rights in relation to credit card operations primarily relate to personal privacy, clarity relating to rights and obligations, preservation of customer records, maintaining confidentiality of customer information and fair practices in debt collection. The card issuing bank / NBFC would be responsible as the principal for all acts of omission or commission of their agents (DSAs / DMAs and recovery agents).

Customer confidentiality

a. The card issuing bank / NBFC should not reveal any information relating to customers obtained at the time of opening the account or issuing the credit card to any other person or organization without obtaining their specific consent, as regards the purpose/s for which the information will be used and the organizations with whom the information will be shared. Banks / NBFCs should satisfy themselves, based on specific legal advice, that the information being sought from them is not of such nature as will violate the provisions of the laws relating to secrecy in the transactions. Banks / NBFCs would be solely responsible for the correctness or otherwise of the data provided for the purpose.

b. In case of providing information relating to credit history / repayment record of the card holder to a credit information company (specifically authorized by RBI), the bank / NBFC may explicitly bring to the notice of the customer that such information is being provided in terms of the Credit Information Companies (Regulation) Act, 2005.

c. Before reporting default status of a credit card holder to the Credit Information Bureau of India Ltd. (CIBIL) or any other credit information Company authorized by RBI, banks / NBFCs may ensure that they adhere to a procedure, duly approved by their Board, including issuing of sufficient notice to such card holder about the intention to report him/ her as defaulter to the Credit Information Company. The procedure should also cover the notice period for such reporting as also the period within which such report will be withdrawn in the event the customer settles his dues after having been reported as defaulter. Banks / NBFCs should be particularly careful in the case of cards where there are pending disputes. The disclosure/ release of information, particularly about the default, should be made only after the dispute is settled as far as possible. In all cases, a well laid down procedure should be transparently followed. These procedures should also be transparently made known as part of MITCs.

d. The disclosure to the DSAs / recovery agents should also be limited to the extent that will enable them to discharge their duties. Personal information provided by the card holder but not required for recovery purposes should not be released by the card issuing bank / NBFC. The card issuing bank / NBFC should ensure that the DSAs / DMAs do not transfer or misuse any customer information during marketing of credit card products.

Fair Practices in debt collection

(a) In the matter of recovery of dues, banks / NBFCs may ensure that they, as also their agents, adhere to the extant instructions on Fair Practice Code for lenders (circular DBOD. Leg. No. BC. 104 /09.07.007 / 2002–03 dated May 5, 2003) as also IBA’s Code for Collection of dues and repossession of security. In case banks / NBFCs have their own code for collection of dues it should, at the minimum, incorporate all the terms of IBA’s Code.

(b) In particular, in regard to appointment of third party agencies for debt collection, it is essential that such agents refrain from action that could damage the integrity and reputation of the bank / NBFC and that they observe strict customer confidentiality. All letters issued by recovery agents must contain the name and address of a responsible senior officer of the card issuing bank whom the customer can contact at his location.

(c) Banks / NBFCs / their agents should not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude the privacy of the credit card holders’ family members, referees and friends, making threatening and anonymous calls or making false and misleading representations.

General Do’s and Don’ts for the customers to avoid trouble:

1. Check your statement for errors or inconsistencies upon issuance and report the same, if any, to the bank immediately. It is preferable to raise issues in writing for future record purpose.

2. If you are terminating your card account, be sure to return the card(cut into pieces) along with your written request for termination (or in a manner prescribed by the card issuing firms) and obtain an acknowledgement from the bank.

3. If you have a dispute pertaining to transaction/s, stop using your card and raise the dispute, in writing, with the Bank. You can block your card from further usage till the dispute is resolved.

4. Before terminating your card account make sure to obtain a ‘Zero’ balance statement. Those who can access card accounts online, they can take print out of such statement.

5. If you are being harassed by the recovery agents (for no fault of yours) then bring it to the notice of the bank, in writing. If necessary you may also lodge a complaint with the police against the recovery agents/ issuing bank. For this you need to have full details of the recovery agents.

6. Many times Customer Care team set-up by the banks may not be helpful in resolving an issue. In such cases you can approach the Nodal Officers. Even if that does not solve your problem then one can elevate the issue to the higher authorities and finally to the Banking Ombudsman.

As per RBI regulation, “If a complainant does not get satisfactory response from the bank / NBFC within a maximum period of thirty (30) days from the date of his lodging the complaint, he will have the option to approach the Office of the concerned Banking Ombudsman for redressal of his grievance/s. The bank / NBFC shall be liable to compensate the complainant for the loss of his time, expenses, financial loss as well as for the harassment and mental anguish suffered by him for the fault of the bank and where the grievance has not been redressed in time. “

The above is not exhaustive. Customers may refer the RBI circular for full guidance

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In terms of paragraph 12.2.1 of RBI Master Circular DBOD.No.Leg.BC.9/09.07.006/2009-10 dated July 1, 2009 on Customer Service, banks have been advised that they should ensure that drafts of small amounts are issued by their branches against cash to all customers irrespective of the fact whether they are having accounts with the banks or not. Bank’s counter staff should not refuse to accept small denomination notes from the customers (or non customers for issuance of the drafts).

RBI has neither defined the term ‘small amounts’ nor specified any limit regarding the same in our Master Circular on Customer Service. However, going by the Clause 12.1 of the Master Circular which states that Banks should ensure that any remittance of funds by way of demand drafts / mail / telegraphic transfer or any other mode and issue of travellers’ cheques for value of Rs. 50,000 and above is effected by debit to the customer’s account or against cheques and not against cash payment, it can be deduced that ‘small amount’ should mean amount below Rs.50,000/- for the purpose of issuing draft against cash as per Clause 12.2.1 of the Master Circular.

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It is widely reported that many banks are asking the customers to use drop box to deposit cheques and thereby avoid providing acknowledgement for receipt of cheques. In this regard vide its Master Circular for Customer Service 2009, RBI has clearly stated as follows:

13. Cheque Drop Box Facility

Both the drop box facility and the facility for acknowledgement of the cheques at regular collection counters should be available to the customers and no branch should refuse to give an acknowledgement if the customer tenders the cheques at the counters.

Banks should ensure that customers are not compelled to drop the cheques in the drop-box. Further, in the context of customer awareness in this regard, banks should invariably display on the cheque drop-box itself that

“Customers can also tender the cheques at the counter and obtain acknowledgment on the pay-in-slips”.

The above message is required to be displayed in English, Hindi and the concerned regional language of the State.

So next time when the bank refuses to give an acknowledgement for cheque deposits, you may quote the above directions from RBI.

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There have been many complaints from customers on the banks reporting default status of a credit card holder to CIBIL. Many banks use CIBIL as a tool to pressurize card holders in making payment of the alleged dues against the card account. This will have a serious implication on the financial credibility of the card holder. Whenever a person applies for loan to banks or other financial institutions, a search by the institutions and banks is done with the CIBIL to assess the credibility of the applicant. If the Applicant’s name appears in the defaulters list then no loan will be sanctioned. However, in this process, many false cases may get reported to CIBIL.

RBI has stipulated guidelines for the banks and other financial institutions to follow before reporting default status of a credit card holder to the Credit Information Bureau of India Ltd. (CIBIL) or any other credit information Company authorized by RBI, banks.

NBFCs may ensure that they adhere to a procedure, duly approved by their Board, including issuing of sufficient notice to such card holder about the intention to report him/ her as defaulter to the Credit Information Company. Therefore, it is important for the banks to issue a notice to the card holder about the bank’s intention to report to CIBIL or similar companies.

It is also required that the card holder should be intimated about the notice period for such reporting and also the period within which such report will be withdrawn in the event the customer settles his dues after having been reported as defaulter.

RBI states that Banks / NBFCs should be particularly careful in the case of cards where there are pending disputes. The disclosure/ release of information, particularly about the default, should be made only after the dispute is settled as far as possible.

In all cases, a well laid down procedure should be transparently followed. These procedures should also be transparently made known as part of Most Important Terms & Conditions (MITCs).

So, if you are a victim of CIBIL reporting, then check whether the bank has followed RBI guidelines and, if necessary, lodge a complaint with banking ombudsman.